Reduce The Use Of Corn-Based Ethanol In Gasoline

| About: Teucrium Corn (CORN)

Summary

The energy policy in the U.S. should shift to the production of shale-base oil, and eliminate corn-based ethanol as a mandated additive to gasoline.

After being squeezed by OPEC during the 1970s by the oil embargo and those long gasoline lines, the U.S. is now energy independent thanks to fracking.

The supporters of corn-based ethanol say that green energy, also known as renewable energy helps the environment, some experts strongly disagree.

With the Iowa Caucuses just days away, farmers are seeking subsidies making the production of corn-based ethanol a political discussion.

The United States has been the largest producer of corn-based ethanol for the last ten years. Production has been increasing since the Energy Tax Act of 1978 created ethanol tax credits to entice farmers to increase the corn crop for refining into ethanol fuel for cars.

In 1980, U.S. production of ethanol became protected by tariff on imported ethanol. At the same time, ethanol producers could obtain loan guarantees to cover 90% of construction costs. The government also set aside funding for research and development to make the process more efficient.

Over the years, the ethanol industry was granted additional tax credits and the goal of increasing production reached 15 billion gallons of corn ethanol by 2015.

Most of us buy gasoline for our cars that's a mix including up to 10% ethanol. Along the way, came the Energy Policy Act of 1992, that mandated that certain fleets on city streets be fueled by a mix of at least 85% ethanol and 15% unleaded gasoline. This ethanol is primarily made from corn. The Act also provided tax deduction to those who purchase a vehicle capable of operating with this so-called alternative fuel.

So why should the production of ethanol be reduced?

The most important reason and controversial is the opinion by many experts that gasoline made from shale oil rather than ethanol would make automobiles run more efficiently, be more economically friendly and provide stability in the U.S. energy industry.

Here's observations made to me by a former Marketing Director at railroad giant Norfolk Southern (NYSE:NSC).

Natural gas or coal are the fuels used to provide the BTUs to produce the corn-based ethanol. Under the best-existing practices, the amount of energy used to grow the corn and convert it into ethanol is 57,504 BTUs per gallon. Ethanol itself contains 84,100 BTUs per gallon.

Fuel heatcontents

Coal = 19,210,000 Btu per short ton (2, heat contents of coal vary widely by types of coal)

Natural gas = 1,025,000 Btu per 1,000 cubic feet

Petroleum = 5,892, Heat contents vary by type of petroleum product

Another observation is that increasing the acreage for growing corn for fuel steals acreage for other grains such as soy beans and wheat. The primary grain to feed cattle is corn, and using corn to make ethanol thus raises the cost beef.

Wouldn't it be nice to reduce the cost of living on Main Street, USA and use any surplus corn to feed the world?

Performance of engines fueled by corn-based ethanol adversely affects the performance of engines. For example, smaller appliances such as lawn equipment and home generators do operate well on ethanol fuel.

Here's part of the debate. Some energy experts say that ethanol reduces harmful tailpipe emissions. Other energy experts disagree. They say that ethanol results in incomplete combustion and produces an increased amount of ground level ozone. This also results in a decline of miles per gallon based upon vehicle type.

A rethinking of the mandates to increase the use of ethanol seem to be on the radar screen this year. In a Nov. 30 story from the Washington Times, the Obama administration back-tracked on its ethanol mandate in the president's promise of extending the green energy revolution.

It appears that the proponents of ethanol blending say that the latest rules fall short of what's needed to further cut greenhouse gas emissions.

The critics say that the entire system is flawed and must be scrapped. At issue is the "blend wall" of increasing the use of ethanol beyond the current 10% ceiling.

Today, there is no need to do this and it's time to eliminate the need to blend ethanol into gasoline at all.

The U.S. is no longer dependent on foreign oil, and support should shift to the producers of oil from shale as the U.S. becomes an exporter of crude oil.

On Monday, corn-based ethanol is a political issue. The corn producers in Iowa want to make certain that the next president will support their ongoing subsidies.

According to the National Review, Donald Trump says he supports the farmers, but will that last very long if he were to win? On the other hand, Senator Cruz opposes the ethanol mandate.

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I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.